The yield on 10-yr Russian sovereign bond has jumped from 8% to 10% in three months. That should be enough to blow out couple of high leveraged MACRO hedge funds specializing in emerging market spread products. It reminds me of LTCM of 1998.
The yield on 10-yr Russian Bond was about 8% in December 2013. Now it is around 10%. The currency exchange rate has fallen more than 25% in 2014.
Given the geopolitical risk is almost completely unexpected, I expect the collapse of some highly leverage emerging market MACRO hedge funds. In this scenario, the US stock market could fall at least 10%.
As long as major part of global sale of oil is priced in USD, there is nothing to worry.
But if the oil price falls to $5 per barrel, then the financial system, including USD, will collapse.
Facts are facts. The rest are opinions.
We all should focus on the facts and reach our own conclusions. There is no point to argue about it.
It is well known that US officials serving State Department have been to Maidan square to encourage the protesters. And according to a leaked audio recording, US special envoy and US Ambassador were discussing which opposition leader they prefer to become the PM after the overthrow. Those are facts.
There are also rumor about other forms of involvement. But that could be false or true, nobody really knows.
And do not forget Ukraine is Russia's neighbor and has strong cultural and economic connection with Russia. That is probably why it is very hard for the entire Ukraine to join EU. Maybe partition is the best solution.
The conflict is escalating, slowly, but surely.
Kerry is playing chicken, for now. I think that he was told to change some of his rhetoric to calm the stock market. Maybe some hedge funds are about to go bust. Nobody really had expected them to carry this minor issue to this far.
But unexpected things can happen over the weekend so that his inner "eagle" might be invoked. ;-))
Now they say that the missing plane might have been hijacked. It might have crashed in the Sea, or it might have landed somewhere. So how do the hijackers plan to use the airplane?
Is this related to Ukrainian conflict, or East China Sea conflict?? Expect the unexpected.
Even if there is no military conflict, some highly leveraged hedge fund might collapse due to unexpected geopolitical risk. That should lead to many forced-selling in various markets, such as bond, CDS, commodity, and stock indices.
How about the corporate bond spread in those countries?
Thanks in advance.
He said "Crimea vote is a foregone conclusion." in English.
Somebody probably asked him to send calming words to the market so that they can prepare before the bigger crash. Crimea's independence will not be the end. The Eastern half of Ukraine will likely split out, too. The question is how we reach there.
Somebody has asked him to calm US/EU market about worry over potential military conflict.
The player of this geopolitical chess game might worry that the blowback might hinder US/EU growth, which could lead to geopolitical risk in US/EU. ;-))
Play the card, but not too harshly.
Market might have 8% more to fall.
I hope that recession will not come back, otherwise whatever happened in Ukraine could well happen in US/EU areas.
If Russia and EU/US all agree today on the partition of Ukraine, then everything will be fine now. But the politicians have to fight thought they knew well about the eventuality.
The financial market is very vulnerable because some hight-leveraged hedge funds might implode, due to unexpected geopolitical risk.
Probably we are not so far from WW 3, after all. Impossible is nothing. ;-))
After Crimea, Eastern Ukraine will become independent, too.
That is people's will. Will EU/US support people's will?
You are right. It looks unlikely at this time.
But things might change and situation on the ground might overwrite any whim of democratically elected leaders. If US war plane was shot down, then what will happen?
The magic machine of the Media has conditioned the public that Putin is like Hitler.
We might lose 300 in DOW today. Maybe thousand points next week if, only if, the military conflict commence.
If those operatives are doing their jobs, then was should start.
Once the conflict starts, democratically elected leaders such as Merkel or Obama will no longer matter much. The situation on the ground will dictate the policy. WW 3 might be just a few missteps away.